Innovative Ratemaking- A Competitive Necessity

Abstract

The electric utility industry is undergoing fundamental changes in the way that new generation capacity may be provided and in the way that electric power is sold to large industrial customers. These changes are increasingly being driven by market forces as American industry responds to the challenge from worthy global competitors for markets in this country and all over the world. The cost of energy for energy intensive industrial companies is absolutely critical to their ability to successfully compete. Conservation efforts have had a dramatic effect on these costs since the early seventies. In this decade, we are witnessing the identification and implementation of innovative, less costly ways of meeting the electric power needs of large customers while, at the same time, providing benefits to utilities and to the utilities’ other ratepayers. Innovative ratemaking can be accomplished in a way that promotes more efficient use of generation and transmission facilities. Innovative ratemaking is no longer an option to the considered, but a competitive necessity for every utility and every large industrial customer.